Blue Cross and Blue Shield of Texas agreed late last month to sell its 21,000-member San Antonio Medicaid business to Centene Corp. and to shed its remaining 57,000 Medicaid members statewide by Aug. 31.
Health plans nationwide have been steadily shuttering or selling off their Medicaid units as states, faced with mounting budget woes, continue to slash funding for government health programs. Regulators in Tennessee, for instance, have moved in recent weeks to liquidate two financially beleaguered Medicaid HMOs, 124,000-member Xantus Health Plan of Tennessee and 95,000-member Universal Care of Tennessee (June 23, p. 40).
Such shake-ups have meant increased opportunity for for-profit Medicaid consolidators like Centene, St. Louis, and Virginia Beach, Va.-based Amerigroup Corp., which say they have the size, expertise and administrative efficiencies to make Medicaid a profitable venture. "We're not looking at pricing (reimbursements) to drive our revenues. We're looking at unit growth," Centene President and Chief Executive Officer Michael Neidorff said.
Both companies have been snapping up Medicaid members at a rapid rate. Amerigroup, which covers 591,000 members in five states and the District of Columbia, entered the Florida Medicaid market in January, when it completed its acquisition of 190,000-member PHP Holdings, Coral Gables, Fla., for $121 million. And in March, it added 30,000-member St. Augustine Medicaid in Miami for $10 million, boosting its total Florida Medicaid membership to 220,000.
For its part, Centene in December bought an 80% stake in University Health Plans, a Newark, N.J.-based HMO with 52,000 Medicaid members. In March, it acquired both ScriptAssist, a Denver-based medication-compliance company, and a 64% interest in Group Practice Affiliates, an Atlanta-based behavioral healthcare company.
The acquisition of the Texas Blues' business will nearly double Centene's San Antonio membership to 45,000. The deal is expected to close in the third quarter pending regulatory approval. Financial terms weren't disclosed. Neidorff declined to say whether Centene was considering acquiring the rest of the Texas' Blues Medicaid membership.
As of March 31, Centene covered 419,300 members who receive Medicaid and State Children's Health Insurance Program benefits in Indiana, New Jersey, Texas and Wisconsin. That's up 68% from 249,3000 members a year earlier.
Centene expects the acquisition to generate revenue of $11 million to $13 million and to add 3 cents to 4 cents per share to earnings during the rest of 2003. In April, the company raised its 2003 earnings forecast to between $2.59 and $2.64 per share on revenue of $720 million to $730 million, excluding any additional acquisitions. Last year, the company earned $25.6 million, or $2.20 per share, on $461.5 million in revenue.